Bank of Japan Gov. Haruhiko Kuroda shocked markets Tuesday by doubling a cap on 10-year yields, sparking a jump in the yen and a slide in government bonds in a move that may help pave the way for possible policy normalization under a new governor.
The BOJ will now allow Japan’s 10-year bond yields to rise to around 0.5%, up from the previous limit of 0.25%, according to a policy statement Tuesday.
The central bank said the move would enhance the sustainability of its monetary easing, but many economists interpreted the move as laying the preliminary groundwork for exiting a decade of extraordinary stimulus policy.